An efficient parallel iterative method with selective blocking preconditioning has been developed for symmetric multiprocessor (SMP) cluster architectures with vector processors such as the Earth Simulator. This method is based on a three-level hybrid parallel programming model, which includes message passing for inter-SMP node communication, loop directives by OpenMP for intra-SMP node parallelization and vectorization for each processing element (PE). This method provides robust and smooth convergence and excellent vector and parallel performance in 3D geophysical simulations with contact conditions performed on the Earth Simulator. The selective blocking preconditioning is much more efficient than ILU(1) and ILU(2). Performance for the complicated Southwest Japan model with more than 23 M DOF on 10 SMP nodes (80 PEs) of the Earth Simulator was 161.7 GFLOPS, corresponding to 25.3% of the peak performance for hybrid programming model, and 190.4 GFLOPS (29.8% of the peak performance) for flat MPI, respectively.